Investment Philosophy

Investment Philosophy

The dynamics of investment markets have changed in recent years, mainly driven by technological and regulatory changes alongside product innovation. Markets have seen liquidity in recent years removed due to regulatory changes, whilst at the same time technology and new products has allowed quicker and easier access to them. Computerised trading using technical triggers is also prevalent and all these factors combined have created an environment where all asset classes move faster and with greater magnitude than ever before, in either direction.

We believe that in order to navigate such markets successfully an investment process needs to be modern, sophisticated and fluid. We believe the best way to control a portfolio’s risk is via asset allocation, using the diversification of various asset classes that behave in contrast to each other in different environments, alongside the flexibility to make efficient defensive positioning or build in protection to portfolios. We have developed our proprietary version of traditional theories for asset allocation which we believe are more relevant in the real and modern world.

At a stock level we would be best described as having a ‘Growth At a Reasonable Price’ style. We like cash generative companies that can provide tangible returns to shareholders, stocks that we can comfortably value and thus use fair value targets to control our buy and sell discipline. We like companies that have genuine growth potential as we believe this drives positive share price returns, alongside sensible valuations as gains (or lack of them) will always be dependent on the price you pay. These companies form the core of our equity exposure but we may at times have the occasional pure growth or typical value stock or stocks ‘around the edges’ where we feel the justification is strong. Our internal stock research has been described by industry participants as being akin to that of an Investment Bank rather than that of a traditional DFM or Stockbroker.

We have a fairly focused or conviction approach and feel that holding too many stocks in a portfolio or fund can lead to the introduction of weaker ideas and dilute the impact of the strongest ones. When investing in equity funds we typically look for managers with a similar philosophy to ourselves and sense check this by comparing the holdings of the manager to our own view of those stocks. We look for managers that have delivered consistent outperformance over multiple time periods rather than headline grabbers that have generated exceptional one off returns that may not be repeated.

By concentrating core equity exposure around a specific style we have a better idea of how it might behave in different environments, this then allows us to use cash, ETFs/smart beta and protection products to build protection or tilt the style bias elsewhere across the portfolio to suit.

Our fixed income positions are generally constructed via funds and collectives but carefully balanced and managed so that the weighted average credit exposure, duration, income yield and yield to maturities are exactly where we believe they need to be. We understand the dynamics of fixed income and yield curves and that just having low or high duration doesn’t always deliver the expected returns when interest rates change.

We apply the same levels of detail used in common asset classes, such as those above, across other asset classes for example Property and Alternatives (which can include Hedge Funds, Renewable Energy, Commodity Trades, Currency Trades, Infrastructure etc). Overall we aim to provide portfolios that look traditional in their nature but which have a Hedge Fund like sophistication to their construction and management behind the scenes.